Directors’ Report
Respected Shareholders, will contribute to the vision of Bangladesh becoming a global On behalf of the Board of Directors of Bangladesh Steel force and gaining the status of a ‘developed nation’ by 2030. Re-Rolling Mills Limited, I am honored, delighted, and eager The steel industry is at the forefront of this meteoric rise in to present to you the 58th Report of the Board of Directors for the year ended June 30, 2020. domestic demand and consumption, and now is a 52,000 crore industry with 7 million MT of annual production Industry outlook and potential future developments capacity. Now around 45 rolling mills are active in in the industry: Bangladesh. In the past few years a good number of steel and re-rolling mills were set up in Bangladesh. BSRM stands atop The economy of Bangladesh is a developing market as the market leader, accounting for about 25% of the total economy. It's the 35th largest in the world in nominal terms, market share amongst other players in the market, like AKS, and 30th largest by purchasing power parity. It is classified KSRM, GPH Ispat and RSRM. among the next eleven emerging market middle income economies and a frontier market. In the first quarter of 2019, Per capita steel consumption of Bangladesh stands at just 45 Bangladesh’s was the world's seventh fastest growing kg as of now, but is projected to grow by 62% by 2022, economy with a rate of 7.3% real GDP annual growth. which shows that the industry does have immense room to grow. In addition to the colossal long-term potential in steel However, presently the world’s economy is undergoing an demand, the adoption of mega projects by the government unprecedented crisis due to the ongoing coronavirus like Padma Bridge, Rooppur Power Plant and Karnaphuli pandemic. We believe our struggle is gradually coming to an Tunnel, has been instrumental to the boom in steel end, however, in the case of a virus resurgence, we will be production and consumption and BSRM is proud to lead and better placed to handle the challenges this time around. contribute to the infrastructural and economic upsurge of Bangladesh. According to the Bangladesh Bureau of Statistics, the economy of Bangladesh grew by 5.24% in the FY Operating and financial performance of 2019-2020 despite the devastating impacts of the global Bangladesh Steel Re-Rolling Mills Limited: pandemic, securely surpassing the projections of 3.8% from IMF and 1.6% from World Bank. Owing to the resilience of During the year 2019-2020, the rolling plant produced the private sector in the domestic economy, a 20% year-on 681,038 M. ton of MS products from billets, which are growth in remittances, and a strong late recovery in the sourced from the company’s own subsidiary BSRM Steel 047 garment industry, Bangladesh’s economic boom as was prior Mills Limited. The stagnation and mere decrease in the to the pandemic remains largely unfazed, laying the production quantity was a result of the lockdown due to the foundation for an unprecedented economic rebound in the COVID-19 crisis. However, the production did pick up some upcoming fiscal years. steam after the restrictions were lifted. The rolling unit’s production have been depicted by the graph below: For the economy to ricochet even further, the government needs to invest in power, textile and infrastructure, all of which
Production (QTY in MT) 800,000 700,000 686,769 681,038 562,903 600,000 500,000 442,511
M. TON 400,000
300,000 241,359 200,000 100,000 45,689 0 2015 2016 2016-17 2017-18 2018-19 2019-20 (Jan-Jun) DIRECTORS’ REPORT The melting unit produces MS billets mainly for internal consumption. The Steel Melting Works (SMW) worked under installed capacity for the first time in three years as a result of the impact of the pandemic and the interrupted production process. Moreover for up gradation of machineries, the plant was shut down for two months.
Rolling and Melting Unit Production over the years: Rolling Unit
2016 Particulars 2019-20 2018-19 2017-18 2016-17 2015 (Jan-Jun)
Installed Capacity (M. Ton) 750,000 540,000 540,000 450,000 225,000 120,000
Production (M. Ton) 680,157 686,769 562,903 442,511 241,359 45,689
Capacity Utilization (%) 91% 127% 104% 98% 107% 38%
Sales of Own Product (M. Ton) 730,832 651,935 536,864 470,937 192,631 54,433
Melting Unit
2016 Particulars 2019-20 2018-19 2017-18 2016-17 2015 (Jan-Jun)
Installed Capacity (M. Ton) 150,000 150,000 150,000 135,000 67,500 135,000
Production (M. Ton) 102,735 174,657 150,331 152,702 66,422 128,022
Capacity Utilization (%) 68% 116% 100% 113% 98% 95%
Sales & Consumed in Re-Rolling Unit (M. Ton) 102,609 174,533 150,947 152,901 66,122 127,553 048
Sales: The sales for BSRMLTD were 742,621 M. ton, which is an 11.14% increase in year-on sales. The sale of the previous year 2018-19 were reported 668,189 M. ton. The sales and production (segment-wise) are represented below:
Segment wise or product wise performance:
Production & Procurement (M. Ton) Sales ( M. Ton) Particulars 2019-20 2018-19 2017-18 2016-17 2019-20 2018-19 2017-18 2016-17
Xtreme 500W, Angle, 681,038 686,769 562,903 442,511 730,832 651,935 536,864 470,937 Channel (Owned Product)
Imported & Locally 13,248 21,977 11,437 37,275 11,789 16,254 13,113 32,768 Procured Items
Total 694,286 708,746 574,340 479,786 742,621 668,189 549,977 503,705 DIRECTORS’ REPORT Financial performance: If we review the profit and loss statement, we can note that the sales of products were higher as compared to last year, primarily The company recorded sales of Tk. 45,722 million in 2019-20 due to an increase in volumes. But the net profit has been compared to Tk. 44,409 million in the prior year, representing a decreased significantly to Tk. 922 million as opposed to an slight increase from last year. The gross profit stood at Tk. 3,674 impressive Tk. 1,861 million in the previous year. This decrease million in 2019-20, a significant 25.3% decrease from last year in net profits can again be attributed to the impacts of the which was Tk. 4,992 million due to higher COGS and the COVID-19 crisis and the increase in the cost of the procurement Covid-19 crisis. Moreover, the selling prices are declining against of raw materials. the increasing raw scrap prices, which was also an important factor contributing to the lower gross profits. Subsequently, the As shown below, the Net Asset Value (NAV) per share has again gross profit ratio stood 8.04% against 11.24% of last year. increased to 99.89, primarily due to the revaluation of the company’s properties in the year 2018-2019 as per BSEC guidelines. The steady increase in NAV per share is a prosperous NAV Per Share sign for the company as it means that the value of our investments 120.00 is increasing. In addition to that, the Earnings per share (EPS) of 97.46 99.89 100.00 the company decreased to 3.90 taka per share from Tk. 7.88 last 80.00 year owing to the decrease in operating income, a decline in share 63.70 60.00 of profits from accounted investees, and instability stemming from the pandemic. However, one of the huge positives is that the Net 40.00 operating cash flow of per share of the company increased to Tk. 20.00 40.47 from Tk. 2.81, which is because of the improvement in the 0 2017-18 2018-19 2019-20 operating cash flows from Tk. 664 million in 2018-19 to Tk. 9,554 million in 2019-20.
Financial Performance: Amount in BDT in million 2019-20 2018-19 2017-18 2016-17 2016 2015 Particulars (Jan-Jun) 049 BD Tk. BD Tk. BD Tk. BD Tk. BD Tk. BD Tk.
Sales 45,722.36 44,408.89 33,238.37 23,648.93 9,713.86 7,801.98
Gross Profit 3,674.29 4,992.24 4,828.32 3,236.93 1,362.03 458.01
Profit before non-operating income, 2,059.03 3,637.90 3,864.96 2,571.90 1,057.78 207.15 interest, taxes, WPPF & WWF Non Operating Income 16.11 41.30 123.21 113.90 472.73 1,357.07
Less: Interest, WPPF & WWF (1,249.09) (1,999.85) (1,950.19) (1,618.89) (636.77) (627.63) Add/(Less): Tax expenses & (413.78) (879.43) (242.75) (440.75) (305.08) (108.92) Provision for income tax Net Profit 921.84 1,860.63 2,778.78 756.52 588.65 827.67
Earnings Per Share (EPS) (Tk.) 3.90 7.88 11.77 3.53 3.02 4.78
Net Asset Value Per Share (Tk.) 99.89 97.46 63.70 55.75 52.84 55.28
Net operating Cash Flow Per Share (Tk.)
40.47 2.81 (8.78) (11.38) (3.53) (10.16) DIRECTORS’ REPORT Other Financial Performance: Amount in BDT in million 2019-20 2018-19 2017-18 2016-17 2016 2015 Particulars (Jan-Jun) BD Tk. BD Tk. BD Tk. BD Tk. BD Tk. BD Tk. Paid Up Capital 2,360.68 2,360.68 2,146.07 1,950.98 1,950.98 1,773.62
Share Holders’ Equity 23,581.64 23,007.37 13,671.41 10,876.80 10,309.79 9,803.66
Current Liabilities 18,125.19 22,883.32 19,310.98 20,107.12 16,865.68 11,999.23
Non-current Liabilities 5,343.79 6,662.92 6,962.32 3,566.99 4,549.52 5,137.16
Addition to Fixed Assets & CWIP 1,373.56 314.89 701.34 756.02 813.34 8,421.03
Operating Cash Flow 9,554.44 664.16 (1,884.73) (2,220.57) (688.88) (1,801.95)
Product-wise Performance:
Xtreme 500W reported sales of 553,109 M. Ton, which represents 74.48% of the total sales of 742,621 M. Ton. Additionally, M.S. Angel, M.S. Square Bar and M. Channel collectively reported 173,150 M. Ton of sales, which represent 23.32% of total sales. The increase in sales for products other than Xtreme 500W depict the increased diversification in sources of product sales. Lastly, during the year, imported products like I Beam, H Beam and MS plate were also sold by the company. The product-wise sales are portrayed below:
Product Performance Breakdown: M. Ton Percentage Xtreme 500W 553,109 74.48%
M.S Angel 90,433 12.18% 050 M.S Square Bar 75,168 10.12%
M. Channel 7,549 1.02%
I Beam 2,535 0.34%
H Beam 894 0.12%
Centura 729 0.10%
Others 12,204 1.64%
Total 742,621 100% DIRECTORS’ REPORT 0.12% 0.34% 0.10% 1.02% Xtreme 500W M.S Angel 1.64% M.S Square Bar 10.12% M. Channel
I Beam
12.18% H Beam
74.48% Centura
Others
New Product: BSRM Xtreme B500 DWR:
In 2008 BSRM changed the reinforcing steel map of the country. It introduced the first weldable grade high strength steel for the country’s construction industry. It was the country’s first Grade 500 steel and branded as BSRM Xtreme500W.
12 years later, in another epochal development, BSRM celebrates the extension of the original as BSRM Xtreme500DWR.
It is the first reinforcing steel in the country with 7 unique features: 051 • A guaranteed Tensile strength to Yield strength ratio at least equal to or greater than 1.25.
• This magic ratio of T/Y: 1.25 in steel is the most sought-after property by veteran civil engineers and designers of high- rise structures. It ensures Toughness of the Buildings.
• Guaranteed conformity to Carbon Equivalent ratio below 0.61 to ensure welding as per American Welding Society AWS D1.4 / D1.4 M
• Guaranteed bending properties for easy site fabrication into shapes required in civil construction as per British Standards BS 4466
• It fulfills all the requirements of Chapter 18 of the seismic design of Buildings of the American Concrete Institute ACI 318-19
• It is fully compliant to Bangladesh National Building Code (BNBC) 2018
• It is also fully compliant to BDS ISO 6935-2:2016 which is the official Reinforcing Steel standard of Bangladesh DIRECTORS’ REPORT Operations of Subsidiary Companies: M. Ton, and it worked under capacity in July’19 to June’20 period producing 605,726 M. ton due to supply chain • BSRM Steel Mills Limited disruptions and less demand caused by the pandemic. A • BSRM (Hong Kong) Limited summary of BSRM Steel Mill Limited’s operational and financial performance has been included below: BSRM Steel Mills Limited:
Currently, BSRMLTD holds a 44.97% stake in this subsidiary company, which started its commercial production in June 2016. Annual capacity of BSRM Steel Mills Ltd is 862,500
Particulars Unit 2019-20 2018-19 2017-18
Production Qty MT 605,726 913,241 860,543
Capacity utilization % 70.27% 106% 99.83%
Net Profit after Tax Taka 598,719,417 1,175,311,103 938,269,829
EPS Taka 1.52 2.98 2.38
NAV Taka 36.09 34.57 15.63
BSRM (Hong Kong) Limited:
BSRM (Hong Kong) Limited is the subsidiary company of has begun its operations with limited arena, and aims to Bangladesh Steel Re-Rolling Mills incorporated in Hong Kong expand significantly in the next fiscal year 2020-21. to assist the parent company in the following ways: Operations of Associated Company:- • Procuring raw materials/ spare parts from China BSRM Steels Limited 052 BSRM Steels Limited, the associate company of Bangladesh • Carrying out prompt inspection of spare parts, Steel Re-Rolling Mills, is also public limited company listed in machineries, etc. to be imported from China to both Dhaka and Chittagong Stock Exchanges. Currently, Bangladesh for BSRM Group BSRMLTD holds 31.19% shares in BSRM Steels Limited. • Trading of steel and other related goods The production of BSRM Steels Ltd was 643, 917 M. ton in Mr. Aameir Alihussain and Mr. Zohair Taherali have been 2019-20, utilizing approximately 86% of the total capacity, appointed as the Directors of this company. The company while the sales was 635,911 M. tons.
Operational Performance of BSRM Steels Limited
2016 to 2016 Particulars 2019 to 2018 to 2017 to 2015 2020 2019 2018 2017 (Jan-Jun) Installed Capacity (M. Ton) 750,000 700,000 700,000 700,000 700,000 700,000 Production (M. Ton) 643,917 758,405 727,034 681,061 362,254 602,832 Capacity Utilization (%) 85.90% 108.34% 103.9% 97.3 103.50 99.5 Sales (M. Ton) 635,911 756,820 710,995 692,504 373,747 604,513 DIRECTORS’ REPORT Financial Performance of BSRM Steels Limited
Amount in BDT in million
2016 to 2016 Particulars 2019 to 2018 to 2017 to 2015 2020 2019 2018 2017 (Jan-Jun) BD Tk. BD Tk. BD Tk. BD Tk. BD Tk. BD Tk.
Sales 38,681.38 61,060.15 48,289.93 37,996.41 17,265.18 32,316.10 Gross Profit 5,172.54 5,051.91 4,879.17 4,557.30 3,114.69 4,368.65 Profit before interest, taxes, WPPF & WWF 3,573.15 3,369.05 3,180.65 3,273.60 2,379.86 3,257.93 Less: Interest, WPPF & WWF (1,899.24) (1,328.76) (1,120.19) (417.23) (246.38) (739.29) Add/(Less): Profit on Bargain Purchase - - 10.20 - - - Add/(Less): Share of profit/(loss) 151.79 297.97 237.88 (225.87) (18.56) 75.31 of associate Less: Tax expenses & Provision for income tax (1,083.43) (610.13) (507.74) (655.07) (801.61) (512.07) Net Profit 742.28 1,728.12 1,800.80 1,705.41 1,313.32 2,081.88 Actuarial (Loss)/Gain - - (3.40) - - -
Total Comprehensive Income 740.76 8,425.54 1,797.40 1,705.41 1,313.32 2,081.88
EPS (Tk.) 1.97 4.60 4.79 4.98 3.84 6.09
Sales of BSRM Steels Limited reduced to Tk. 38,682 million Risks & Concerns: in 2019-20, however, the gross profit did increase from last Risk assessment and mitigation is the integral part of any year which is a testament to the company’s increased business. The Board of Directors are regularly monitoring, 053 emphasis on reducing selling and administrative expenses. assessing and identifying potential risk and threats to our Additionally, BSRM Steels Limited earned net profits of profitability and sustainable growth. Our Risk Management Tk. 742 million in 2019-20. capabilities are supported by a strong management structure, BSRM Service center: information system, and regular analysis of market, economic scenario and robust policies to cope with the challenges. BSRMLTD has commissioned a state-of-the-art reinforcement processing plant. Total estimated annual capacity of the project BSRM Group has developed Enterprise Risk Management is 14,400 MT of Cut & Bent Rebar, 2,880 MT of Stirrup & (ERM) Frame work and Guidelines. Under this policy a Risk 48,000 MT of Mesh. This customized solution will decrease Register has been prepared and a dedicated team is regularly wastage significantly in addition to reducing extra space monitoring potential risks, assess them, ensure precautionary requirements for the customers for storing construction and corrective measures to address them. materials. It will also reduce delay in construction, faulty A summary of the significant risks and the way of managing fabrication, pilferage and laborious works at customer’s site risks adopted by our company is included in Annexure-1 and and will increase quality of the construction works. This new Note -50 of the Financial Statements. plant will have positive impact on the profitability of the Company.
DIRECTORS’ REPORT Risk Management & Control Environment: period 2020, our sales totaled 123,099 M. ton, while for Details discussed in Annexure 1A. the same two-months period of last year, our sales equaled A Discussion on Cost of Goods Sold, GP 248,505 M. tons, which is a whole 50% drop. The plunge Margin and NP Margin: in sales specifically during this period and the volatility of raw material prices are primary components of the decline in It has been discussed in Annexure 2. our profitability. Extra-ordinary gain or loss: We encountered extraordinary circumstances because of the Related Party Transactions: COVID-19 crisis, which serves as the most prominent factor All transactions with related parties have been made on a in the significant reduction in our Net Profit Margin after Tax commercial basis. Details of the related party transactions (NPAT) in the year 2019-20. For instance, in the April-May have been disclosed under note 26 & 37 of the financial statements as per IFRS/BFRS.
Significant variance in the quarterly and Annual Financial Statements:
For the Year For the Period Particulars Unit July'19 to July’18 to April'20 to Jan'20 to Oct'19 to July’19 to June'20 June’19 June'20 March'20 Dec'19 Sept’19 Production-Rod M. Ton 681,038 686,769 133,946 198,937 198,733 149,422 Sales M. Ton 742,621 668,189 139,203 272,320 204,632 126,466 Revenue Tk In Million 45,722 44,409 8,194 16,591 12,466 8,472 Cost of sales Tk In Million (42,048) (39,417) (7,503) (15,316) (11,658) (7,570) Gross profit Tk In Million 3,674 4,992 690 1,274 808 901 Profit before tax Tk In Million 1,336 2,740 284 545 184 323 Income tax expenses: Current year Tk In Million (274) (317) (55) (97) (73) (50) 054 Previous year Tk In Million (13) (39) (0) (13) - - Deferred tax Tk In Million (126) (523) (50) (54) 9 (32) Total income tax expense Tk In Million (414) (879) (105) (164) (63) (82) Profit after tax Tk In Million 922 1,861 179 381 121 241 Basic earnings per share Taka 3.90 7.88 0.76 1.61 0.51 1.02
Due to fluctuation in raw material prices, less demand and Board of Directors: disruptions in the supply chain due to the pandemic, the production and sales fluctuated from quarter to quarter. The i. Composition and size of the Board: th reduction in gross and net profits were a result of these On June 30 2020, there were 5 members on the Board factors. panel, comprising of the Chairman, the Managing Director, two Directors, and an Independent Director. Remuneration of Directors including the Independent Director: ii. Board Meeting and attendance: The Board met 8 (eight) times during the period Directors were remunerated as per the decision of the Board and July 1, 2019 to June 30, 2020. The following table a detailed report of the Directors’ Remuneration is attached in shows the attendance of the directors in the meeting. DIRECTORS’ REPORT the Annexure 3 and Note 8.02 of Financial Statements. Name of the Directors Position No. of meeting held No. of Meeting Attended during the Period
Mr. Alihussain Akberali, FCA Chairman 8 8
Mr. Aameir Alihussain Managing Director 8 8
Mr. Zohair Taherali Director (Nominated Director 8 8 of H. Akberali & Co. Limited) Mrs. Sabeen Aameir Director 8 8
Mr. Mono Ranjan Dey FCA Independent Director 8 6
The Board members who were unable to attend the meeting name of the companies in which the Directors hold their were granted leave or were outside the country at the time of respective positions and memberships have been the meeting. disclosed in the Board of Directors segment. iii. Details of Directors being re-appointed: Mr. Alihussain Akberali FCA and Mr. Aameir Significant deviations in operating results Alihussain will retire as per the rotation policy at the compared to last year: conclusion of this AGM as per Articles of Association of The reasons for decline in profitability: the Company and being eligible, they will offer • Less Production & less Sales due to pandemic COVID-19. themselves for re-appointment. • “Share of profit of equity accounted investees” stood Tk. iv. Appointment of Independent Director: 509.57 Million which was Tk. 1060.71 Million in 2019, as Pursuant to the BSEC’s directive and on discussion, income of subsidiaries and associates has declined due to Board Members have recommended to appoint minimum tax imposed by the government on the steel Mr. Gobinda Chandra Paul FCA as the Independent industry in Section 82 C of Income tax ordinance. Director of the Company with effect from 1st November, • Selling and distribution cost has also increased by 231. 29 2020 for a period of next 3 (three) years. Mr. Gobinda Million to maintain and increase the market share. Chandra Paul FCA born in 1951. He possesses more than 3 decades of experience in internal & external audit Management Discussion and Analysis: and assurance, developing internal control, Tax and VAT A management discussion and analysis signed by Managing 055 matters. He is a qualified Chartered Accountant and Director regarding the Companies operation and position Fellow Member of the Institute of Chartered Accountants along with a brief discussion of changes in the financial of Bangladesh (ICAB). Currently, he is a Managing statements has been attached in Annexure D. Partner of the reputed Chartered Accountancy firm - Credit Rating: Basu Banerjee Nath & Co. The Credit Rating Information and Services Limited (CRISL) iv. A brief resume of directors, independent director and the assigned rating as below:
Long Term Short Term
AA ST-2
The entities were rated AA, which are adjudged to be of high Our company in the evaluation of credit rating company was quality, offer higher safety, and have a high credit quality. This placed as “Stable Outlook”. rating also indicates that the loan/facilities enjoyed by the Internal Control system: entity has a sound credit profile with modest risks. The Board of Directors ensures that the company places a Additionally, our short-term outlook was increased to ST-2 high priority in an effective internal control system so that the from ST-3 in 2019-20, which itself is an evidence of our assets of the company are safeguarded and that appropriate strong capacity and certainty of timely payment. Moreover, systems are in place to minimize and detect fraud, errors, and the liquidity factors remain strong and supported by good other irregularities. The company has adopted the Standard fundamental protection factors, while the risks remain small. Operating Procedures (SOP) for a superior internal control DIRECTORS’ REPORT system. Moreover, Enterprise Resource Planning (ERP) has Dividend: been implemented in the company to consolidate the process • The Directors of your Company recommended 15% of gathering and organizing business data through an cash dividend for the year ended June 30, 2020. In the integrated software suite. The company has also established previous year the Company declared 25% cash an Internal Audit department, which plays a vital role in dividend ensuring that internal control and compliance is maintained. • The retained fund will be utilized to pay off high rated In addition to that, the Audit Committee regularly monitors loans and to meet working capital and operational and reviews the reports presented by the internal audit expenses. department and takes corrective measures. Contribution to National Exchequer: utility bill) was Tk. 3,303 million, which is an increase of Tk. 194 million from the previous year. The majority of the BSRM has contributed significantly to the country’s growth contribution was through the payment of income taxes, VAT, and development through the payment of substantial taxes, etc. which amounted to Tk. 1,313 million. Additionally, making investments and job creation in the steel industry. BSRMLTD collected and contributed through mediums like During the period of July’19 to June’20, the collective power, duties, and gas, which helped the company deposit a contribution of BSRM to the National Exchequer (including significant sum to the government exchequer.
Contribution to National Exchequer July'19 - June '20
248 667
Duty
Income Tax & VAT 1,075 Power 056 Gas 1,313
BSRM Group has also generated direct and indirect innovative solutions to environmental and social issues. employment for a large number of people over the years. Details of CSR activities have been described in detail on Currently, BSRM Group collectively employs 3,736 people, page no. 85 of the Annual Report. including management and non-management, making it a notable contributor to the workforce and employment of our Award and Recognition: nation. BSRM is proud to contribute significantly to the It is our great pleasure to let you know that, we have achieved national exchequer and aims to continue assisting the some prestigious awards during last few years. A few of them government in all its ventures in future as well. are mentioned below: Corporate Social Responsibilities: 1) Third Highest Taxpayer Award in engineering category for the tax period 2018-19. BSRM’s commitment to connect business decisions to 2) ICAB National Award for Best presented Annual Report ethical, social, and environmental concerns remains to be (second prize) in 2018. one of the core values of the company. During the year 2019-20, the company has been contributing to the welfare 3) Certificate of Merit ICAB Award 2018.
DIRECTORS’ REPORT of the community by investing in R&D to come up with 4) Certificate of Merit Award from SAFA in 2018. 5) National Productivity and Quality Excellence Award-2017. extracted from E-business solution at any point of time to 6) National Export Trophy – (BSRM Steels Ltd.) for mitigate risks and develop financial performance. Our IT team 2013-14, 2014-15, 2016-17. has developed customer-friendly windows that allow them to order, complain, query through an automated system within 7) Certificate of admiration from Ministry of Expatriates Welfare and Overseas Employment of Government the shortest possible time. Details of Information technology Republic of Bangladesh at 4th National Development are set out in the Chapter ‘Sustainable Growth’ in page no. 89 Fair 2018. in this report. 8) President’s Award for Industrial Development 2014 in Human Resource Management: the category of Large Scale Industry. As one of the visions of BSRM is “Be an employer of choice, 9) Prestigious award for “Excellence in Supply Chain with focus on nurturing talent and developing future leaders of Relationship Management & Logistic Management” the organization”, BSRM takes pride in developing a from Bangladesh Supply Chain Management Society. successful, dynamic and competent set of human assets. As 10) ICAB National Awards for Best Presented Annual we believe our visions and values are only achievable through Reports for the year 2012, 2013, 2015 & Certificate the placement of the right person at the right place, we have of Merit for the year 2014, 2015. effectively established a sound Human Resource saga that 11) Certificate of Merit from South Asian Federation of consists of mind-blowing stories of equal opportunity, Accountants (SAFA) in 2012, 2013 & 2015 – (BSRM continuous learning and development, relentless industry Steels Limited). relation and molding skilled workforce. Details of Human 12) ICSB National Gold Award for best Corporate Resource are set out in the Chapter ‘Sustainable Growth’ in Governance Excellence 2015 – (BSRMLTD). page no. 88 in this report. 13) Awarded Tax Card from NBR for highest tax payment in Code of Conduct: 2016-17 – (BSRM Steels Ltd.) 14) Best Brand of Bangladesh in Steel Category in 2011, The Nomination & Remuneration Committee (NRC) determined 2013, 2014, 2015 & 2016, 2017 & 2018. the code of conducts for Board of Directors of the Company which have been posted on the web site of the company. All 15) Best Enterprise of the year 2010 – (BSRM Group). the Directors have signed as acceptance to its compliance. 16) D & B Corporate Awards 2010 & 2012 – (BSRM 057 Steels Limited). Auditors: 17) Pride of Chittagong (Chattagramer Ahonkar) 2012 (Mr. The existing external Auditors of the Company Rahman Alihussain Akberali FCA). Rahman Huq, Chartered Accountants, will retire on 18) Divisional Environment Award 2013 – (BISCO Ltd.). conclusion of 58th AGM being completion of 3rd year of their 19) 5th Standard Chartered-Financial Express CSR Award appointment and will not be eligible to conduct audit for the – (BSRM Group). year 2020-21 as per directive of Bangladesh Securities and Exchange Commission (BSEC). 20) Japan Bangladesh Chamber of Commerce & Industry (JBCCI) Awards in 2014 – (BSRM LTD). The Audit Committee has recommended the Board to appoint A. Qasem & Co. Chartered Accountants as the auditors of the 21) ICSB National Award (Silver Award) for Corporate Company for the year 2020-2021. Governance Excellence 2014. – (BSRM Steels Limited). The Board endorsed the recommendation of the Audit Information Technology: Committee for the appointment of A. Qasem & Co., Chartered Accountants (a member firm of Ernst & Young Standing on the age of digitalization and technological Global Limited), Faruk Mahal (3rd Floor), Plot # 93, Agrabad advancement, engagement to customers and stakeholders C/A, Chattogram as the statutory auditors for the year ended requires greater emphasis on mastering Information on June 30, 2021 subject to the approval of shareholders in Technology. BSRM has implemented a strong and up-to-date the next Annual General Meeting. IT set up, that continuously ensures required information to be DIRECTORS’ REPORT Professional Accountant for Compliance of f) Minority shareholders have been protected from abusive Corporate Governance: actions by, or in the interest of, controlling shareholders acting either directly or indirectly and have effective means of Pursuant to the BSEC’s directive, Board has recommended redress. Mr. Sidhartha Barua FCA, Managing Partner of M/s M.A. Mallik & Co., Chartered Accountants, Aziz Chamber (2nd g) There are no doubts upon the company’s ability to Floor), 6 Jubilee Road, Chattogram to appoint as a continue as a going concern and the annual accounts have Professional Accountant to issue Certificate on Compliance of been prepared as a going concern basis. Corporate Governance Code enacted by Bangladesh h) The key operating and financial date for the last six years Securities and Exchange Commission for the year ended on is disclosed in Annexure 4. June 30, 2020 subject to approval of the shareholders in the i) The pattern of shareholding is disclosed in Annexure 5. next Annual General Meeting. j) A compliance status report with requirements of corporate Reporting and Compliance of Corporate governance as required by BSEC has been disclosed in Governance: Regulatory Compliance Report segment. Status of compliance with the requirements / conditions of k) Directors’ profile and their directorship and business Bangladesh Securities and Exchange Commission (BSEC) interest in other organizations have been disclosed in Board Notification No: BSEC/CMRRCD/2006-158/207/Admin/80, of Directors segment. dated: 03 June, 2018 on corporate governance has been included in the Report in Annexure C. l) There was no declaration of bonus share or stock dividend as interim dividend. Subsequent Events: Acknowledgements: There is no reportable subsequent event after the date of Financial Position and till the date of this report which could I, on behalf of the board, express my heartiest gratitude to all affect the ability of the users of these financial statements to the honorable shareholders, bankers, Registrar of Joint Stock make an appropriate evaluation. Companies, National Board of Revenue, BSEC, DSE, CSE and other Governing bodies for their continuous support Directors’ Responsibilities Statements: throughout our journey, specially the government of Pursuant to the BSEC notification No. Bangladesh who encourages us enhancing their numerous 058 BSEC/CMRRCD/2006-158/207/Admin/80 dated 03 June, supportive measures to overcome the current crisis caused 2018 the Directors confirm that: by COVID-19 pandemic. We believe that the more the a) The Financial Statements prepared by the management of supports you are providing us continue the faster we will BSRM LTD fairly present its state of affairs, the result of its progress. operations, cash flows and changes in equity. I am also delighted to offer my sincere appreciations and b) Proper Books of Account of the Company have been respect to our management team and workforces for their maintained. commitment and hard work. It’s the excellent exemplary team work that kept us moving beyond possibilities. We always c) Appropriate accounting policies have been consistently applied welcome your effective suggestion, advice and guideline with in preparation of the financial statements and that the accounting newer ideas. estimates are based on reasonable and prudent judgment. We are endlessly pushing our limits to achieve efficiency and d) International Accounting Standard (IAS)/Bangladesh profitability to the maximum level. We need your support and Accounting Standards (BAS)/International Financial Reporting association to build a better and safer nation. Standards (IFRS) / Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in Stay safe, preparation of the financial statements and any departure there from has been adequately disclosed. e) The system of internal controls sounds in design and has Alihussain Akberali FCA Chairman
DIRECTORS’ REPORT been effectively implemented and monitored. ANNEXURE-A [As per condition no.1(5)(xxvi)] Bangladesh Steel Re-Rolling Mills Limited Declaration of CEO and CFO
Date: October 15, 2020
The Board of Directors Bangladesh Steel Re-Rolling Mills Limited Ali Mansion, 1207/1099 Sadarghat Road, Chattogram.
Subject: Declaration on Financial Statements for the year ended on 30th June 2020.
Dear Sirs, Pursuant to the condition No. 1(5)(xxvi) imposed vide the commission’s notification No. BSEC/CMRRCD/2006-158/207/ Admin/80, Dated 03 June, 2018 under section 2CC of the Securities and Exchange Ordinance 1969, we do hereby declare that:
1. The Financial Statements of Bangladesh Steel Re-Rolling Mills Limited for the year ended on 30th June 2020 have been prepared in compliance with International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS), as applicable in Bangladesh and any departure there from has been adequately disclosed; 2. The estimates and judgments related to financial statements were made on a prudent and reasonable basis, in order for the financial statements to reveal a true and fair view; 3. The form and substance of transactions and the company’s state of affairs have been reasonably and fairly presented in its financial statements; 4. To ensure above, the Company has taken proper and adequate care in installing a system of Internal control and maintenance of accounting records; 5. Our internal auditors have conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Company were consistently followed; and 059 6. The management’s use of the going concern basis of accounting in preparing the financial statements is appropriate and there exists no materials uncertainty related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
In this regard, we also certify that:-
(i) We have reviewed financial statements for the year ended 30th June 2020 and that to the best of our knowledge and belief: a) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; b) These financial statements collectively present true and fair view of the company’s affairs and are in compliance with existing accounting standards and applicable laws. (ii) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or in violation of the code of conduct for the company’s Board of Directors or its members.
Sincerely yours,
Aameir Alihussain Mohammed Reazul Kabir FCA DIRECTORS’ REPORT Managing Director Assistant General Manager & CFO ANNEXURE-B [As per condition no.1(5)(xxvi)] Certificate on Compliance with Conditions of Corporate Governance Code
060 DIRECTORS’ REPORT ANNEXURE-C [As per condition no.1(5)(xxvii)] Corporate Governance Compliance Report
Status of compliance with the condition imposed by the Commission's Notification No. BSEC/CMRRCD/2006-158/207/ Admin/80, dated 03 June, 2018 issued under section 2CC of the Securities and Exchange Ordinance,1969: (Report under condition No: 9)
Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
1 BOARD OF DIRECTORS
1(1) Size of the Board of Directors The total number of members of a company’s Board of Directors (hereinafter √ referred to as “Board”) shall not be less than 5 (five) and more than 20 (twenty).
1(2) Independent Directors All companies shall have effective representation of independent directors on their Boards, so that the Board, as a group, includes core competencies considered relevant in the context of each company; for this purpose, the companies shall comply with the following: -
1(2)(a) At least one-fifth (1/5) of the total number of directors in the company’s Board shall be independent directors; any fraction shall be considered to the next √ integer or whole number for calculating number of independent director(s);
1(2)(b) For the purpose of this clause 'Independent directors' means a director-
1(2)(b)(i) Who either does not hold any share in the company or holds less than one √ percent (1%) shares of the total paid-up shares of the company;
1(2)(b)(ii) who is not a sponsor of the company or is not connected with the company’s any sponsor or director or nominated director or shareholder of the company or any of its associates, sister concerns, subsidiaries and parents or holding entities who holds one percent (1%) or more shares of the total paid-up shares of the √ company on the basis of family relationship and his or her family members also shall not hold above mentioned shares in the company: 061 1(2)(b)(iii) who has not been an executive of the company in immediately preceding 2 (two) financial years; √
1(2)(b)(iv) Who does not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary or associated companies; √
1(2)(b)(v) Who is not a member or TREC (Trading Right Entitlement Certificate) holder, director or officer of any stock exchange; √
1(2)(b)(vi) who is not a shareholder, director excepting independent director or officer of any member or TREC holder of stock exchange or an intermediary of the capital √ market;
1(2)(b)(vii) Who is not a partner or an executive or was not a Partner or an executive during the preceding 3 (three) years of the concerned company's statutory audit firm; √
1(2)(b)(viii) Who shall not be an independent director in more than 5 (five) listed companies; √
1(2)(b)(ix) Who has not been convicted by a court of competent jurisdiction as a defaulter in payment of any loan or any advance to a bank or a Non-Bank Financial √ Institution (NBFI);
1(2)(b)(x) Who has not been convicted for a criminal offence involving moral turpitude. √
1(2)(c) The independent director(s) shall be appointed by the board of directors and √ approved by the shareholders in the Annual General Meeting (AGM).
1(2)(d) The post of independent director(s) can not remain vacant for more than 90 (ninety) days. √
1(2)(e) The tenure of office of an independent director shall be for a period of 3(three) years, which may be extended for 1(one) tenure only. √ DIRECTORS’ REPORT Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
1(3) Qualification of Independent Director (ID)
1(3)(a) Independent director shall be a knowledgeable individual with integrity who is able to ensure compliance with financial laws, regulatory requirement and √ corporate laws and can make meaningful contribution to business.
1(3)(b) Independent director shall have following qualifications:
1(3)(b)(i) Business Leader who is or was a promoter or director of an unlisted company having minimum paid-up capital of Tk. 100.00 million or any listed company or N/A a member of any national or international chamber of commerce or business association; or
1(3)(b)(ii) Corporate Leader who is or was a top level executive not lower than Chief Executive Officer or Managing Director or Deputy Managing Director or Chief Financial Officer or Head of Finance or Accounts or Company Secretary or Head of Internal Audit and Compliance or Head of Legal Service or a candidate with N/A equivalent position of an unlisted company having minimum paid up capital of k. 100.00 million or of a listed company; or
1(3)(b)(iii) Former official of government or statutory or autonomous or regulatory body in the position not below 5th Grade of the national pay scale, who has at least educational background of bachelor degree in economics or commerce or N/A business or law; or
1(3)(b)(iv) University Teacher who has educational background in Economics or Commerce N/A or Business Studies or Law; or
1(3)(b)(v) Professional who is or was an advocate practicing at least in the High Court Division of Bangladesh Supreme Court or a Chartered Accountant or Cost and √ Management Accountant or Chartered Financial Analyst or Chartered Certified Accountant or Certified Public Accountant or Chartered Management Accountant or Chartered Secretary or equivalent qualification;
1(3)(c) The independent director shall have at least 10 (ten) years of experiences in any field mentioned in clause (b) √
062 1(3)(d) In special cases the above qualifications may be relaxed subject to prior approval of the Commission. N/A
1(4) Duality of Chairperson of the Board of Directors and Managing Director or Chief Executive Officer:-
1(4)(a) The positions of the Chairperson of the Board and the Managing Director (MD) and/or Chief Executive Officer (CEO) of the company shall be filled by different √ individuals.
1(4)(b) The Managing Director (MD) and/or Chief Executive Officer (CEO) of a listed N/A company shall not hold the same position in another listed company **
1(4)(c) The Chairperson of the Board shall be elected from among the non-executive directors of the company; N/A*
1(4)(d) The Board shall clearly define respective roles and responsibilities of the Chairperson and the Managing Director and/or Chief Executive Officer; √
1(4)(e) In the absence of the Chairperson of the Board, the remaining members may elect one of themselves from non-executive directors as Chairperson for that particular Board’s meeting; the reason of absence of the regular Chairperson √ shall be duly recorded in the minutes.
1(5) The Directors' Report to Shareholders
The Board of the company shall include the following additional statements or disclosures in the Directors’ Report prepared under section 184 of the Companies Act, 1994 (Act No. XVIII of 1994):-
1(5)(i) An industry outlook and possible future developments in the industry √ DIRECTORS’ REPORT 1(5)(ii) The segment-wise or product-wise performance √ Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
1(5)(iii) Risks and concerns including internal and external risk factors, threat to √ sustainability and negative impact on environment, if any;
1(5)(iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin, √ where applicable;
1(5)(v) A discussion on continuity of any extraordinary activities and their implications (gain or loss); √
1(5)(vi) A detailed discussion on related party transactions along with a statement showing amount, nature of related party, nature of transactions and basis of √ transactions of all related party transactions;
1(5)(vii) A statement of utilization of proceeds raised through public issues, rights issues and/or any other instruments N/A
1(5)(viii) An explanation if the financial results deteriorate after the company goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Share Offer, Direct N/A Listing, etc.;
1(5)(ix) An explanation on any significant variance that occurs between Quarterly √ Financial performances and Annual Financial Statements;
1(5)(x ) A statement of remuneration paid to the directors including independent directors; √
1(5)(xi) A statement that the financial statements prepared by the management of the issuer company present fairly its state of affairs, the result of its operations, cash √ flows and changes in equity;
1(5)(xii) A statement that proper books of account of the issuer company have been √ maintained; 1(5)(xiii) A statement that appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are √ based on reasonable and prudent judgment 1(5)(xiv) A statement that International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there from √ 063 has been adequately disclosed; 1(5)(xv) A statement that the system of internal control is sound in design and has been effectively implemented and monitored; √ 1(5)(xvi) A statement that minority shareholders have been protected from abusive actions by, or in the interest of, controlling shareholders acting either directly or indirectly √ and have effective means of redress; 1(5)(xvii) A statement that there is no significant doubt upon the issuer company’s ability to continue as a going concern, if the issuer company is not considered to be a going concern, the fact along with reasons there of shall be disclosed; √ 1(5)(xviii) An explanation that significant deviations from the last year’s operating results of the issuer company shall be highlighted and the reasons thereof shall be √ explained; 1(5)(xix) A statement where key operating and financial data of at least preceding 5 (five) years shall be summarized √ 1(5)(xx) An explanation on the reasons if the issuer company has not declared dividend (cash or stock) for the year; N/A 1(5)(xxi) Board’s statement to the effect that no bonus share or stock dividend has been or shall be declared as interim dividend; N/A
1(5)(xxii) The total number of Board meetings held during the year and attendance by each √ director; 1(5)(xxiii) A report on the pattern of shareholding disclosing the aggregate number of shares (along with name-wise details where stated below) held by:- DIRECTORS’ REPORT Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
1(5)(xxiii)(a) Parent or Subsidiary or Associated Companies and other related parties (name-wise details); √ 1(5)(xxiii)(b) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and Compliance and their spouses and minor children √ (name-wise details); 1(5)(xxiii)(c) Executives; and √ 1(5)(xxiii)(d) Shareholders holding ten percent (10%) or more voting interest in the company (name-wise details); √ 1(5)(xxiv) In case of the appointment/re-appointment of a director the company shall disclose the following information to the shareholders: 1(5)(xxiv)(a) A brief resume of the director √ 1(5)(xxiv)(b) Nature of his/her expertise in specific functional areas; √ 1(5)(xxiv)(c) Names of companies in which the person also holds the directorship and the membership of committees of the board. √ 1(5)(xxv) A Management’s Discussion and Analysis signed by CEO or MD presenting detailed analysis of the company’s position and operations along with a brief discussion of changes in the financial statements, among others, focusing on: 1(5)(xxv)(a) Accounting policies and estimation for preparation of financial statements; √ 1(5)(xxv)(b) Changes in accounting policies and estimation, if any, clearly describing the effect on financial performance or results and financial position as well as cash √ flows in absolute figure for such changes;
1(5)(xxv)(c) Comparative analysis (including effects of inflation) of financial performance or results and financial position as well as cash flows for current financial year with √ immediate preceding five years explaining reasons thereof;
1(5)(xxv)(d) Compare such financial performance or results and financial position as well as √ cash flows with the peer industry scenario; 064 1(5)(xxv)(e) Briefly explain the financial and economic scenario of the country and the globe; √ 1(5)(xxv)(f) Risks and concerns issues related to the financial statements, explaining such risk and concerns mitigation plan of the company; and √
1(5)(xxv)(g) future plan or projection or forecast for company’s operation, performance and financial position, with justification thereof, i.e., actual position shall be explained √ to the shareholders in the next AGM;
1(5)(xxvi) Declaration or certification by the CEO and the CFO to the Board as required under condition No. 3(3) shall be disclosed as per Annexure-A and √
1(5)(xxvii) The report as well as certificate regarding compliance of conditions of this Code as required under condition No. 9 shall be disclosed as per Annexure-B and Annexure-C √
1(6) Meetings of the Board of Directors
The company shall conduct its Board meetings and record the minutes of the meetings as well as keep required books and records in line with the provisions of the relevant Bangladesh Secretarial Standards (BSS) as adopted by the √ Institute of Chartered Secretaries of Bangladesh (ICSB) in so far as those standards are not inconsistent with any condition of this Code
1(7) Code of Conduct for the Chairperson, other Board members and Chief Executive Officer
1(7)(a) The Board shall lay down a code of conduct, based on the recommendation of the Nomination and Remuneration Committee (NRC) at condition No. 6, for the √ Chairperson of the Board, other board members and Chief Executive Officer of the company; DIRECTORS’ REPORT Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
1(7)(b) The code of conduct as determined by the NRC shall be posted on the website of the company including, among others, prudent conduct and behavior; confidentiality; conflict of interest; compliance with laws, rules and regulations; √ prohibition of insider trading; relationship with environment, employees, customers and suppliers; and independency.
2 GOVERNANCE OF BOARD OF DIRECTORS OF SUBSIDIARY COMPANY
2(a) Provisions relating to the composition of the Board of the holding company shall √ be made applicable to the composition of the Board of the subsidiary company;
2(b) At least 1 (one) independent director on the Board of the holding company shall √ be a director on the Board of the subsidiary company;
2(c) The minutes of the Board meeting of the subsidiary company shall be placed for √ review at the following Board meeting of the holding company
2(d) The minutes of the respective Board meeting of the holding company shall state √ that they have reviewed the affairs of the subsidiary company also;
2(e) The Audit Committee of the holding company shall also review the financial √ statements, in particular the investments made by the subsidiary company
3 MANAGING DIRECTOR (MD) OR CHIEF EXECUTIVE OFFICER (CEO), CHIEF FINANCIAL OFFICER (CFO), HEAD OF INTERNAL AUDIT AND COMPLIANCE (HIAC) AND COMPANY SECRETARY (CS)
3(1) Appointment
3(1)(a) The Board shall appoint a Managing Director (MD) or Chief Executive Officer (CEO), a Company Secretary (CS), a Chief Financial Officer (CFO) and a Head of √ Internal Audit and Compliance (HIAC); 3(1)(b) The positions of the Managing Director (MD) or Chief Executive Officer (CEO), Company Secretary (CS), Chief Financial Officer (CFO) and Head of Internal Audit √ and Compliance (HIAC) shall be filled by different individuals;
3(1)(c) The MD or CEO, CS, CFO and HIAC of a listed company shall not hold any executive position in any other company at the same time; √ ** 065
3(1)(d) The Board shall clearly define respective roles, responsibilities and duties of the CFO, the HIAC and the CS; √
3(1)(e) The MD or CEO, CS, CFO and HIAC shall not be removed from their position without approval of the Board as well as immediate dissemination to the √ Commission and stock exchange(s).
3(2) Requirement to attend Board of Directors’ Meetings
The MD or CEO, CS, CFO and HIAC of the company shall attend the meetings of √ the Board:
3(3) Duties of Managing Director (MD) or Chief Executive Officer (CEO) and Chief Financial Officer (CFO)
3(3)(a) The MD or CEO and CFO shall certify to the Board that they have reviewed financial statements for the year and that to the best of their knowledge and belief:
3(3)(a)(i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; and √
3(3)(a)(ii) these statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards and applicable laws; √
3(3)(b) The MD or CEO and CFO shall also certify that there are, to the best of knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or in violation of the code of conduct for the √ company’s Board or its members;
3(3)(c) The certification of the MD or CEO and CFO shall be disclosed in the Annual DIRECTORS’ REPORT Report. √ Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
4 BOARD OF DIRECTORS’ COMMITTEE
For ensuring good governance in the company, the Board shall have at least following sub-committees:
4(i) Audit Committee; and √ 4(ii) Nomination and Remuneration Committee. √
5 AUDIT COMMITTEE
5(1) Responsibility to the Board of Directors.
5(1)(a) The company shall have an Audit Committee as a subcommittee of the Board; √ 5(1)(b) The Audit Committee shall assist the Board in ensuring that the financial statements reflect true and fair view of the state of affairs of the company and in √ ensuring a good monitoring system within the business;
5(1)(c) The Audit Committee shall be responsible to the Board; the duties of the Audit Committee shall be clearly set forth in writing. √
5(2) Constitution of the Audit Committee.
5(2)(a) The Audit Committee shall be composed of at least 3 (three) members; √ 5(2)(b) The Board shall appoint members of the Audit Committee who shall be non-executive directors of the company excepting Chairperson of the Board and √ * shall include at least 1 (one) independent director;
5(2)(c) All members of the audit committee should be “financially literate” and at least 1 (one) member shall have accounting or related financial management √ background and 10 (ten) years of such experience; 5(2)(d) When the term of service of any Committee member expires or there is any circumstance causing any Committee member to be unable to hold office before expiration of the term of service, thus making the number of the Committee members to be lower than the prescribed number of 3 (three) persons, the Board √ shall appoint the new Committee member to fill up the vacancy immediately or 066 not later than 1 (one) month from the date of vacancy in the Committee to ensure continuity of the performance of work of the Audit Committee;
5(2)(e) The company secretary shall act as the secretary of the Committee; √
5(2)(f) The quorum of the Audit Committee meeting shall not constitute without at least √ 1 (one) independent director.
5(3) Chairperson of the Audit Committee
5(3)(a) The Board shall select 1 (one) member of the Audit Committee to be Chairperson √ of the Audit Committee, who shall be an independent director;
5(3)(b) In the absence of the Chairperson of the Audit Committee, the remaining members may elect one of themselves as Chairperson for that particular meeting, in that case there shall be no problem of constituting a quorum as √ required under condition No. 5(4)(b) and the reason of absence of the regular Chairperson shall be duly recorded in the minutes.
5(3)(c) Chairperson of the Audit Committee shall remain present in the Annual General Meeting (AGM). √
5(4) Meeting of the Audit Committee
5(4)(a) The Audit Committee shall conduct at least its four meetings in a financial year. √
5(4)(b) The quorum of the meeting of the Audit Committee shall be constituted in presence of either two members or two-third of the members of the Audit Committee, whichever is higher, where presence of an independent director is a √ must. DIRECTORS’ REPORT Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
5(5) Role of Audit Committee
The Audit Committee shall:- √ 5(5)(a) oversee the financial reporting process; √
5(5)(b) monitor choice of accounting policies and principles; √ 5(5)(c) monitor Internal Audit and Compliance process to ensure that it is adequately resourced, including approval of the Internal Audit and Compliance Plan and √ review of the Internal Audit and Compliance Report;
5(5)(d) oversee hiring and performance of external auditors; √ 5(5)(e) hold meeting with the external or statutory auditors for review of the annual financial statements before submission to the Board for approval or adoption; √
5(5)(f) review along with the management, the annual financial statements before √ submission to the Board for approval;
5(5)(g) review along with the management, the quarterly and half yearly financial √ statements before submission to the Board for approval;
5(5)(h) review the adequacy of internal audit function; √
5(5)(i) review the Management’s Discussion and Analysis before disclosing in the √ Annual Report;
5(5)(j) review statement of all related party transactions submitted by the management; √ 5(5)(k) review Management Letters or Letter of Internal Control weakness issued by √ statutory auditors;
5(5)(l) oversee the determination of audit fees based on scope and magnitude, level of expertise deployed and time required for effective audit and evaluate the √ performance of external auditors; and
5(5)(m) oversee whether the proceeds raised through Initial Public Offering (IPO) or Repeat Public Offering (RPO) or Rights Share Offer have been utilized as per the N/A purposes stated in relevant offer document or prospectus approved by the 067 Commission.
5(6) Reporting of the Audit Committee
5(6)(a) Reporting to the Board of Directors
5(6)(a)(i) The Audit Committee shall report on its activities to the Board. √
5(6)(a)(ii) The Audit Committee shall immediately report to the Board on the following findings, if any:
5(6)(a)(ii)(a) report on conflicts of interests; N/A 5(6)(a)(ii)(b) suspected or presumed fraud or irregularity or material defect identified in the N/A internal audit and compliance process or in the financial statements;
5(6)(a)(ii)(c) suspected infringement of laws, regulatory compliances including securities N/A related laws, rules and regulations; and
5(6)(a)(ii)(d) any other matter which the Audit Committee deems necessary shall be disclosed N/A to the Board immediately;
5(6)(b) Reporting to the Authorities
If the Audit Committee has reported to the Board about anything which has material impact on the financial condition and results of operation and has discussed with the Board and the management that any rectification is necessary N/A and if the Audit Committee finds that such rectification has been unreasonably ignored, the Audit Committee shall report such finding to the Commission, upon reporting of such matters to the Board for three times or completion of a period of
6 (six) months from the date of first reporting to the Board, whichever is earlier. DIRECTORS’ REPORT Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
5(7) Reporting to the Shareholders and General Investors
Report on activities carried out by the Audit Committee, including any report made to the Board under condition No. 5(6)(a)(ii) above during the year, shall be signed by the Chairperson of the Audit Committee and disclosed in the annual √ report of the issuer company.
6 NOMINATION AND REMUNERATION COMMITTEE (NRC)
6(1) Responsibility to the Board of Directors
6(1)(a) The company shall have a Nomination and Remuneration Committee (NRC) as a √ sub-committee of the Board;
6(1)(b) The NRC shall assist the Board in formulation of the nomination criteria or policy for determining qualifications, positive attributes, experiences and independence of directors and top level executive as well as a policy for formal process of √ considering remuneration of directors, top level executive;
6(1)(c) The Terms of Reference (ToR) of the NRC shall be clearly set forth in writing covering the areas stated at the condition No.6(5)(b). √
6(2) Constitution of the NRC
6(2)(a) The Committee shall comprise of at least three members including an √ independent director; 6(2)(b) All members of the Committee shall be non-executive directors; N/A* 6(2)(c) Members of the Committee shall be nominated and appointed by the Board; √
6(2)(d) The Board shall have authority to remove and appoint any member of the √ Committee;
6(2)(e) In case of death, resignation, disqualification, or removal of any member of the Committee or in any other cases of vacancies, the board shall fill the vacancy within √ 180 (one hundred eighty) days of occurring such vacancy in the Committee; 6(2)(f) The Chairperson of the Committee may appoint or co-opt any external expert 068 and/or member(s) of staff to the Committee as advisor who shall be non-voting member, if the Chairperson feels that advice or suggestion from such external √ expert and/or member(s) of staff shall be required or valuable for the Committee;
6(2)(g) The company secretary shall act as the secretary of the Committee; √ 6(2)(h) The quorum of the NRC meeting shall not constitute without attendance of at √ least an independent director;
6(2)(i) No member of the NRC shall receive, either directly or indirectly, any remuneration for any advisory or consultancy role or otherwise, other than √ Director’s fees or honorarium from the company.
6(3) Chairperson of the NRC
6(3)(a) The Board shall select 1 (one) member of the NRC to be Chairperson of the √ Committee, who shall be an independent director;
6(3)(b) In the absence of the Chairperson of the NRC, the remaining members may elect one of themselves as Chairperson for that particular meeting, the reason of √ absence of the regular Chairperson shall be duly recorded in the minutes;
6(3)(c) The Chairperson of the NRC shall attend the annual general meeting (AGM) to √ answer the queries of the shareholders.
6(4) Meeting of the NRC
6(4)(a) The NRC shall conduct at least one meeting in a financial year; √ 6(4)(b) The Chairperson of the NRC may convene any emergency meeting upon request √ by any member of the NRC; DIRECTORS’ REPORT Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
6(4)(c) The quorum of the meeting of the NRC shall be constituted in presence of either two members or two third of the members of the Committee, whichever is √ higher, where presence of an independent director is must as required under condition No. 6(2)(h);
6(4)(d) The proceedings of each meeting of the NRC shall duly be recorded in the minutes and such minutes shall be confirmed in the next meeting of the NRC √
6(5) Role of the NRC
6(5)(a) NRC shall be independent and responsible or accountable to the Board and to the shareholders; √
6(5)(b) NRC shall oversee, among others, the following matters and make report with recommendation to the Board:
6(5)(b)(i) formulating the criteria for determining qualifications, positive attributes and independence of a director and recommend a policy to the Board, relating to the remuneration of the directors, top level executive, considering the following:
6(5)(b)(i)(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate suitable directors to run the company successfully; √
6(5)(b)(i)(b) the relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and √
6(5)(b)(i)(c) remuneration to directors, top level executive involves a balance between fixed and incentive pay reflecting short and long-term performance objectives √ appropriate to the working of the company and its goals;
6(5)(b)(ii) devising a policy on Board’s diversity taking into consideration age, gender, experience, ethnicity, educational background and nationality; √
6(5)(b)(iii) identifying persons who are qualified to become directors and who may be appointed in top level executive position in accordance with the criteria laid √ down, and recommend their appointment and removal to the Board;
6(5)(b)(iv) formulating the criteria for evaluation of performance of independent directors and the Board; √ 069 6(5)(b)(v) identifying the company’s needs for employees at different levels and determine their selection, transfer or replacement and promotion criteria; and √
6(5)(b)(vi) developing, recommending and reviewing annually the company’s human resources and training policies; √
6(5)(c) The company shall disclose the nomination and remuneration policy and the evaluation criteria and activities of NRC during the year at a glance in its annual √ report.
7 EXTERNAL OR STATUTORY AUDITORS
7(1) The issuer company shall not engage its external or statutory auditors to perform the following services of the company, namely:- √
7(1)(i) appraisal or valuation services or fairness opinions; √
7(1)(ii) financial information systems design and implementation; √
7(1)(iii) book-keeping or other services related to the accounting records or financial √ statements;
7(1)(iv) broker-dealer services; √ 7(1)(v) actuarial services; √
7(1)(vi) internal audit services or special audit services; √
7(1)(vii) any service that the Audit Committee determines; √ 7(1)(viii) audit or certification services on compliance of corporate governance as required √ DIRECTORS’ REPORT under condition No. 9(1); and Compliance Status Condition (Put √ in the appropriate column ) Remarks Title No. (if any) Complied Not Complied
7(1)(ix) any other service that creates conflict of interest. √ 7(2) No partner or employees of the external audit firms shall possess any share of the company they audit at least during the tenure of their audit assignment of that company; his or her family members also shall not hold any shares in the said √ company:
7(3) Representative of external or statutory auditors shall remain present in the Shareholders’ Meeting (Annual General Meeting or Extraordinary General √ Meeting) to answer the queries of the shareholders.
8 MAINTAINING A WEBSITE BY THE COMPANY
8(1) The company shall have an official website linked with the website of the stock √ exchange.
8(2) The company shall keep the website functional from the date of listing. √
8(3) The company shall make available the detailed disclosures on its website as required under the listing regulations of the concerned stock exchange(s). √
9 REPORTING AND COMPLIANCE OF CORPORATE GOVERNANCE
9(1) The company shall obtain a certificate from a practicing Professional Accountant or Secretary (Chartered Accountant or Cost and Management Accountant or Chartered Secretary) other than its statutory auditors or audit firm on yearly basis regarding compliance of conditions of Corporate Governance Code of the √ Commission and shall such certificate shall be disclosed in the Annual Report.
9(2) The professional who will provide the certificate on compliance of this Corporate Governance Code shall be appointed by the shareholders in the annual general √ meeting.
9(3) The directors of the company shall state, in accordance with the Annexure-C attached, in the directors’ report whether the company has complied with these √ conditions or not.
We do not have any non-executive Directors in the Board 070 * ** Permission have been taken from Ministry of Commerce of People's Republic of Bangladesh under section 109 of Companies Act 1994 to hold the position as Managing Director in other some companies DIRECTORS’ REPORT ANNEXURE-D
Management Discussion and Analysis on Company’s Position and Operation
Bangladesh Steels Re-Rolling Mills Limited has anchored this position based on its market-leading capacities, world-class manufacturing process, high production capacity utilization, optimized cost structures, vibrant sales and distribution network, superior post-sales support and robust customer engagement programs. The overall Company’s position has been reflected in the Financial Statements which has prepared following all International Financial Reporting Standards and International Accounting Standards. The company’s position and future planning, methods of financial statement preparation have been summarized below: Accounting Policies and Estimates for preparation of Financial Statements: The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations in Bangladesh as per requirements under the Financial Reporting Act 2015. Cash flows from operating activities are prepared under direct method as prescribed by the Securities and Exchange Rules 1987. These financial statements have been prepared ongoing concern basis under the historical cost convention except for some classes of property, plant and equipment which are measured at revalued amount. On 14 December 2017, the Institute of Chartered Accountants of Bangladesh (ICAB) has adopted International Financial Reporting Standards issued by the International Accounting Standards Board as IFRSs. As the ICAB previously adopted such standards as Bangladesh Financial Reporting Standards without any modification, this recent adoption will not have any impact on the financial statements of the Company going forward. Detail of significant accounting policies and Estimates are disclosed in “Note no. 3 and 4 of the Financial Statements” of 2019-2020. Changes in that accounting Policies and Estimates: The Company has consistently applied the accounting policies to all periods presented in these financial statements. The Company applied IFRS 16 from 01 July 2019. As a result, the Company has changed its accounting policy for lease contracts. The Company applied IFRS 16 using the modified retrospective approach, under which the effect of initial application is recognized from July 01, 2019 in the financial statements. The details of the changes in accounting policies are disclosed in “Note no. 4 and 42 of the Financial Statements” of 2019-2020. 071 The company has not early adapted any standards, interpretations or amendments that have issued but are not yet effective.
Comparative analysis on financial performance of the Company: Financial Performance: Amount in BDT in million 2016 2019-20 2018-19 2017-18 2016-17 2015 Particulars (Jan-Jun) BD Tk. BD Tk. BD Tk. BD Tk. BD Tk. BD Tk.
Sales 45,722.36 44,408.89 33,238.37 23,648.93 9,713.86 7,801.98
Cost of Goods Sold 42,048.07 39,416.65 28,410.05 20,412.00 8,351.84 7,343.97
Gross Profit 3,674.29 4,992.24 4,828.32 3,236.93 1,362.03 458.01
Selling & Distribution Expenses 1,223.32 992.03 638.54 434.75 179.76 80.84
Administrative Expenses 419.39 389.52 358.90 242.08 128.49 186.05
Net Finance Cost 1,205.61 1,905.85 1834.51 1551.52 591.81 627.64 DIRECTORS’ REPORT Financial Performance: Amount in BDT in million 2016 2019-20 2018-19 2017-18 2016-17 2015 Particulars (Jan-Jun) BD Tk. BD Tk. BD Tk. BD Tk. BD Tk. BD Tk.
Income Tax Expenses 413.78 879.43 242.75 440.75 305.08 108.92
Net Profit After Tax 921.84 1,860.63 2,778.78 756.52 588.65 827.67
Earnings Per Share (EPS) 3.90 7.88 12.95 3.53 3.02 4.78
The following operating and financial review is intended to convey the Management’s perspective on the financial and operating performance of the Company for the Financial Year 2019-20. During the year under review, the Company recorded a profit after tax of Tk. 921.84 Million against previous years of Tk. 1,860.63 Million. Net profit decreased as GP declined, Selling and Marketing expenses increased as well as Other Non-operating income also declined in this year. The basic earnings per share for the Financial Year 2019-20 were at Tk. 3.90 against Tk. 7.88 per share of previous year. This year Revenue from sale of products was higher as compared to the previous year. Cost of goods sold was also higher in line with the increasing revenue as compared to the previous year by 7%. The Company’s operating expenses (Selling, Distribution, Marketing, Administrative, Net Finance Cost and Income Tax expenses) decreased by 22 % to BDT 3,262 Million in 2019-20 from BDT 4,166 Million in 2018-19. Comparative Analysis on Financial position of the Company: Financial Positions: Amount in BDT in million 2016 2019-20 2018-19 2017-18 2016-17 2015 Particulars (Jan-Jun) BD Tk. BD Tk. BD Tk. BD Tk. BD Tk. BD Tk.
Paid Up Capital 2,360.68 2,360.68 2,146.07 1,950.98 1,950.98 1,773.62 072 Share Holders’ Equity 23,581.64 23,007.37 13,671.41 10,876.80 10,309.79 9,803.67
Current Liabilities 18,125.19 22,883.33 19,310.98 20,107.12 16,865.68 11,999.23
Non-current Liabilities 5,343.79 6,662.93 6,962.32 3,566.99 4,549.52 5,137.16
Addition to fixed assets & CWIP 982.93 192.12 327.70 525.46 577.02 2273.12
Net Asset Value Per Share 99.89 97.46 63.70 55.75 52.84 55.28
Shareholders’ equity increased by 2.50 % to BDT 23,582 Million in 2019-20, from BDT 23,007 Million in 2018-19. The major additions to the fixed assets were land, building, purchase of plant and machinery etc. Inventory comprises finished goods of BDT 4,767 Million, raw materials of BDT 2,941 Million, stores and consumables spares of BDT 2,114 Million. The Company has a policy of maintaining adequate inventory to ensure uninterrupted operations. Trade and other receivables comprises of trade receivables where in average receivables cycle is maintained at 90 days. Cash and bank balances include cash in hand of BDT 1.54 Million, balances in bank accounts of BDT 205.38 Million and fixed deposits of BDT 402.55 Million. Liquid balances of cash and bank are necessary for the smooth functioning of the business.
Equity capital comprised 23,60,68,236 no equity shares of BDT 10 each. The market value of the share is BDT 53.50 is (as on 30 June 2020, DSE) resulting in a market capitalization of BDT 12,630 Million. Non-Current borrowings include current portion of long term borrowings of BDT 2,008.39 Million and noncurrent portion of BDT 2,323.14 Million in 2019-20. DIRECTORS’ REPORT Current liabilities decreased by 20% to BDT 18,125.19 Million in 2019-20 from BDT 22,883.33 Million in 2018-2019. Comparative Analysis on Cash Flow of the Company: Cash Flow Movements: Amount in BDT in million 2016 2019-20 2018-19 2017-18 2016-17 2015 Particulars (Jan-Jun) BD Tk. BD Tk. BD Tk. BD Tk. BD Tk. BD Tk.
Cash generate from operating activities 10,961.80 2,914.99 13.28 (1,741.06) 152.17 (896.10)
Interest Paid (1,205.61) (1,897.63) (1,823.27) (388.86) (678.59) (640.54)
Income Tax Paid (201.75) (353.20) (74.77) (90.65) (162.45) (265.31)
Net Cash Flow from operating activities 9,554.44 664.16 (1,884.73) (2,220.57) (688.88) (1,801.95)
Net Cash Flow used in investing (868.95) (173.13) (197.56) (322.39) (1,438.33) (1,507.65) activities Net Cash Flow used in (8,818.39) (435.42) 2,275.67 2,760.56 2,151.43 3,507.47 financing activities Net Increase/(Decrease) (132.90) 55.61 193.38 217.60 24.22 197.88 in Cash & Cash Equivalent
Cash flow from operating activities: Due to smooth collection trade receivables have decreased by BDT 224.23 Million and cash inflow increased. Net operating cash flow per share increased to BDT 40.47 in 2019-20 from BDT 2.81 in 2018-19. Cash flow from investing activities:
Net cash used in investing activities have increased to BDT (868.95) Million in 2019-20 from BDT (173.13) Million in 073 2018-19. Cash flow from financing activities: Net cash used in financing activities have increased to BDT (8,818.39) Million in 2019-20 from BDT (435.42) Million in 2018-19 due to increase in payment of loan. The company also paid cash dividend (i.e. @ 25%) in 2019-20 against 10% in 2018-2019. Financial Performance of Peer Industry: BSRM Steels Limited Taka in Million
July'19- July'18- July'17- Jul'16- Jan'16- Operational Results: 2015 June'20 June'19 June'18 June'17 June'16
Revenue 38,681.38 61,060.15 48,289.93 37,996.41 17,265.18 32,316.10
Gross Profit 5,172.54 5,051.91 4,879.17 4,557.30 3,114.69 4,368.65
Profit after Tax 742.28 1,728.13 1,800.80 1,705.41 1,313.32 2,081.88
EPS 1.97 4.60 5.27 4.98 3.84 6.09 DIRECTORS’ REPORT BSRM Steels Limited Taka in Million
July'19- July'18- July'17- Jul'16- Jan'16- Operational Results: 2015 June'20 June'19 June'18 June'17 June'16
Net Assets Value (NAV) 56.84 55.58 37.48 34.03 27.42 26.57
Net Operating Cash Flow 5.81 (12.43) 2.90 1.07 9.05 16.87
GPH Ispat Limited (GPH) Taka in Million
Operational Results: 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15
Revenue 9,406 11,111 9,814 7,839 5,743 5,988
Gross Profit 1,553 2,158 1,603 1,373 960 901
Profit after Tax 299 806 644 571 289 292
EPS 0.79 2.24 1.97 1.83 2.65 2.34
Net Assets Value (NAV) 17.01 17.59 16.89 16.15 15.45 16.40
Net Operating Cash Flow (8.10) 1.44 1.12 3.83 0.41 4.67
Global and Local Economic Scenario: 074 Before the pandemic, Bangladesh’s economy was booming with a constant growth rate. The World Bank and IMF forecast that our GDP growth would be below 3.0 per cent. As per the Bangladesh Bureau of Statistics, or BBS, Bangladesh has reported 5.24 per cent GDP growth in FY 2019-20 after almost everything was closed for four months from March to June. Where the economy grew by a record 8.15 percent in FY 2018-19. With the economy almost fully reopened, the government has kept the annual GDP growth target for 2020-21 fiscal year unchanged at 8.2 per cent.
The steel industry plays a fundamental role in not only driving economic growth, but also other complementary industries such as transportation, energy, heavy engineering and construction. Considering that the government’s lofty goals of achieving double digital growth in the economy and simplifying its foreign direct investment (FDI) policy, measures being taken to better facilitate the ease of doing business, and several mega projects, economic processing zones, and incentives for foreign investment, the macroeconomic factors to stimulate growth. Given all these measure with a growing capacity of producers and technological enhancement of operations currently being undertaken, the steel industry in Bangladesh looks to be strong in the next fiscal years. DIRECTORS’ REPORT Risk and Mitigation: Though the economy in Bangladesh is growing very fast and it creates an opportunity for steel industries, there are also some risks. Global warming and green house effects, makes Bangladesh cyclone prone area. Moreover, energy crisis, port congestion, poor infrastructure etc. creates obstacles for prospect of steel industry. However, now some positive steps have been taken by the Government. LNG supply, Rooppur N. Plants will hopefully reduce energy crisis. Now construction of deep sea ports are in government agenda. Number of roads and bridges have been constructed. Government is going to set up some Exclusive Economic zones. Industry favorable policies and rules have been enacted. We have set up a separate department to identify and assess the internal potential risks and to find a way out how to mitigate those risks. The enterprise risk management policy has been enforced. A dedicated team is regularly monitoring the Enterprise Risk and take corrective measures.
Future Planning: BSRM Group is planning to sell 16.35 lac M. Ton in the coming year. Out of this around 8 lac M. Ton will be supplied by BSRM LTD. Moreover, we are looking forward to introduce high quality steel products like the recently launched “BSRM Xtreme B500DWR” and plan to extend maximum support to our valued customers.
Aameir Alihussain Managing Director
075 DIRECTORS’ REPORT ANNEXURE-1
Risk Factors and Concerns
1. Business Risks To manage these risks, we undertake various risks specific measures and strategies on regular basis a) Risks associated with sourcing of Raw Materials Interest Rates Bangladesh Steel Re-Rolling Mills Limited (BSRMLTD) was heavily dependent for its basic raw material, MS Billets, on Interest rate risk refers to the risk that increases cost of the international market up to June 2016. In case of billet capital which will have an adverse impact on consolidated net price fluctuation in the international market, the company financial income. suffered and its profitability was also affected. The business of BSRMLTD requires huge working capital. To meet the challenge, a separate company “BSRM Steel Although the company closely monitors and manages Mills Limited” was commissioned in June 2016 to produce requirement of capital investment, the actual capital 862,000 M. Ton MS Billets per year, which significantly requirement may deviate from the projected one due to reduces outside dependency. Steel Melting Unit of BSRMLTD factors beyond its control, thus potentially affecting the can also supply 150,000 M. Ton Billet per year. Now borrowing costs. Interest rate on working capital and term BSRMLTD is also procuring billets from BSRM Steels Limited loan has increased during last six months of this year which (unit BISCO). Moreover, a new billet producing unit under also impact the net income of the company. BSRM Steels Limited with capacity of 430,000 M. Ton per Prudent financial management and active negotiation with the annum has already started operations. lenders and timely collection from customers are few of b) Risks associated with Power Supply significant steps to reducing funding cost.
Presently the primary constraint on the economic Foreign Exchange Fluctuations development of Bangladesh is the shortage of power for Foreign currency risk is the risk of changes in exchange rates which new industrial investments proposal from home and 076 that adversely affect the company’s earnings, equity, and aboard have failed to materialize. competitiveness. For ensuring uninterrupted power supply BSRM Group has We are hugely involved with Foreign Trade i.e. Import & made a deal with PGCB and installed a substation for tapping Export and thus we are also exposed to Foreign Currency power from the 230 KV national grids. Today, more than Risks. Exchange rate gains or losses related to foreign 10,000 MW power can be produced in Bangladesh. The currency transactions are recognized as transaction gains and government is also planning for setting up some big power losses in our income statement as incurred. We also maintain stations. There is an additional regular risk of having an foreign currency account in which export collection is directly adequate and regular supply of gas. The Company is also deposited and we can meet foreign currency payment aware of such risks and its mitigation through the alternative requirements. In the year 2018-19 company has not been supply of fuel. affected due to Foreign Currency fluctuation. Further, as a 2. Market Risks mitigation plan we plan to purchase USD in advance based on the market situation. Like other industry, trade, and commerce, we are also exposed to market risks arising from adverse changes in: Competition and Economic conditions
• Interest Rate; Competition refers to the risks of decreasing present market • Currency Rate (foreign exchange rates) share by new entrants. We try to mitigate this risk through active brand management and customer relationship and by • Competition ensuring timely supply of quality product.
DIRECTORS’ REPORT • Economic conditions As we continuously explore any untapped opportunity and also to adopt customer’s needs, we believe we would be able ii. BSRM Recycles 373,700 Cubic Meters of water every to cope with any situation in the industry we are working. day. We have invested in technologically superior 3. Technology Related Risks European Water Treatment Plant in its steel plants which has helped BSRM to recycle every drop of used water Highly automated and competitive types of machinery are and achieve zero water wastage. available with the Company for the manufacture of various steel products. The Company has so far been one of the iii. BSRM plants 10,000 trees in its factories. We have pioneers in Bangladesh in setting up mills with undertaken a plan for reforestation efforts in collaboration State-of-the-Art European Technology for further processing with partner organizations, and conduct tree plantation of the input materials. The Company also implemented Oracle programs around main steel plants. e-Business Suite to integrate the operation of basic functions We firmly believe that ZERO can save lives. namely, Finance and Accounts, Sales and Marketing, Supply Chain, Inventory, Maintenance, and Manufacturing. Business Intelligence (BI) Analytics Tool for BSRM Group started in May 2018 which help senior management and Board members to have information from one central point. 4. Environmental Risks
BSRM is proud to be ZERO in factory emissions and effects on environment. To reduce pollution in our plants and protect human and nature alike, BSRM Has undertaken environment friendly initiatives which are as follows: i. BSRM Cleans 31,584,000 Cubic Meters of air every day. We are using Japanese air pollution control technology for this purpose. 077 DIRECTORS’ REPORT ANNEXURE-1A
Enterprise Risk Management and Control Environment
Enterprise Risk Management framework • Formalising a process for identifying opportunities arising out of risk situations The Enterprise Risk Management framework (ERM framework) refers to a set of components that provide the • Improving deployment or more efficient use of capital and foundation for designing, implementing, monitoring, resources reviewing and continually improving risk management ERM helps BSRMLTD in managing risks in a proactive throughout BSRM Group of Companies. The ERM framework manner towards achieving its business objectives, for the Group has been developed keeping in mind the needs of internal and external stakeholders. The BSRM Group’s performance & profitability targets and prevent loss of ERM framework is based on the ‘Risk Management - resources. BSRM’s ERM is directed to help ensure effective Principles and Guidelines’ developed by the International reporting and compliance with laws and regulations, avoid damage to the entity’s reputation and its consequences. Organization for Standardization (ISO 31000:2009 – Risk Management Principles and Guidelines). Key principles of ERM Framework In addition, several good practices recommended by the The guiding principles of BSRM’s Risk Management Committee of Sponsoring Organizations (COSO) for ERM Framework are as follows: have incorporated in BSRM Group’s endeavor to build world • Risk Management should be a continuous process class ERM framework and processes. • Risk Management principles should be kept in mind BSRM Enterprise Risk Management (“ERM”) Framework during the strategy and objective setting processes as well provides guidance to implement a consistent, efficient, and as the day-to-day activities and decision-making economical approach to identify, evaluate and respond to key • Risks should be understood and prioritized based on the risks that may impact business objectives. event frequency and impact to one or more objectives 078 BSRM’s enterprise risk management framework is directed to • The same metrics used to measure objectives e.g., enable management to effectively deal with uncertainty and revenue, customer satisfaction metrics, are to be associated risks and opportunities, enhancing the capacity to preferably leveraged during risk management activities build value. The Steps are: • Risk response strategies are to be evaluated for those • Promoting risk awareness throughout the BSRMLTD as risks deemed to be high or medium priority well as BSRM Group of Companies. • Key risk management information (e.g., key events, • Defining risk appetite results of risk assessments, risk responses) is to be • Identifying and managing multiple and cross-enterprise documented in a timely and structured manner risks • Policies, procedures and practices should be in • Identifying risk management team with clearly defined synchronisation with risks roles and responsibilities • A portfolio view of risks is to be reviewed by the Board, • Formalizing risk response decisions Audit Committee, Management Team and Chief Risk • Reducing operational surprises and losses Officer on a regular basis DIRECTORS’ REPORT BSRM’s Risk Management Framework comprises of:
STRATEGY
OBJECTIVES RISK /CULTURE POLICY APPETITE DEFINES FRAMEWORK TO IMPLEMENT STRATEGY
Infrastructure Processes Organisation Risk Rating Technology Risk Monitoring Departments/ Monitoring & Guidelines & Systems Identification & Reporting Committees Reporting
Management Risk Risk Roles & Skills & Information Assessment Reporting Responsibilities Experience
Risk Management Methodology of BSRM:
Risk
Simply stated risk is the possibility that an event will occur and adversely affect the achievement of objectives. Risks can be thought of as threats, uncertainty or lost opportunity.
Risk Management as a process
The process of Risk Management deals with how the organization • Identifies risks that affect achievement of goals & objectives 079 • Measures the significance of each identified risk • Determines the most appropriate business response to each risk • Evaluates and reports on how well the chosen responses are being implemented Risk Management Guidelines
The ERM guidelines provide supporting information to assist Management in the execution of the ERM processes.
ERM process is the systematic application of management policies, procedures and practices to the activity of communicating, consulting and establishing the context for ERM in BSRM Group of Companies. The ERM process comprises of risk identification & assessment, risk treatment and risk monitoring applies across the organizational lifecycle.
Against the given background, the key process constituents of ERM are:
RISK RISK RISK RISK RISK MONITORING IDENTIFICATION ANALYSIS EVALUATION TREATMENT AND REPORTING DIRECTORS’ REPORT Disclosure of Risk Reporting:
We are following the below process for risk reporting in BSRM Group of Companies:
Documentation Description Monitored by Risk Register and Profile Record identified Risks and detailed Designated Risk Manager. description of risk which needs to be prioritized
Risk response and mitigation Detailed current risk response and Designated Mitigation owner and Risk details of Management actions with Manager. timelines
Risk Report at Business unit and A report/form of communication Risk Managers, Chief Risk Officer and corporate level intended to inform particular Risk Steering Committee. stakeholders by providing information regarding the current state of key risks and its management. It is represented by a "Heat Map" where key risks are plotted and is supported by the detailed risk profiles
Risk report at group level Executive Summary Report with the Chief Risk Officer. selected top risks and responses at group level
080 DIRECTORS’ REPORT ANNEXURE-2
Discussion on Cost of Goods Sold, GP Margin and NP Margin
COST OF GOODS SOLD COGS
Cost of goods sold (COGS) is the expense a company incurs in order to manufacture, create, and sell a product. It includes the purchase price of the raw material as well as the expenses of turning it into a finished product.
COGS vary directly with sales and production, the more items we sell or make, the more stock or components we need to buy.
During the year 2019-2020 Cost of goods sold (COGS) was Tk. 42,048 million against Tk. 39,416 million of 2018-2019. GROSS PROFIT MARGIN RATIO
Gross profit is the difference between sales and the cost of goods sold.
Gross Profit=Sales–Cost of Goods Sold
The gross profit margin is one indicator of the financial health of a business. Larger gross profit margins are better for business– the higher the percentage, the more the business retains of each Taka of sales for other expenses and net profit.
Gross Profit Margin %= (Gross Profit ÷ Sales) x 100
During the year 2019-20 Gross Profit Margin was 8.04% which was 11.24% in 2018-19. Due to increase in billet price and other cost of production gross profit margin has declined. NET PROFIT MARGIN RATIO
Net Profit is calculated by subtracting expenses including Tax and WPP & WF from the gross profit, showing what the business has earned (or lost) in a given period of time.
Net Profit=Gross Profit–Expenses with Tax & WPP & WWF 081 Net profit has stood Tk. 921.84 Million which was Tk. 1,860.63 Million in 2018-19. Net profit decreased as Selling and Marketing expenses increased as well as Other Non-operating income also declined in this year. This decrease in net profits can again be attributed to the impacts of the COVID-19 crisis. DIRECTORS’ REPORT ANNEXURE-3
Remuneration Paid to Directors in 2019-20
Members of the Board of Directors were entitled and paid as follows: Remuneration Paid to Directors in 2019-20
2019-20 2018-19 Name Gross Gross Attendance Attendance Remuner Total Paid Remuner Total Paid Fee ation Fee ation Mr. Alihussain Akberali FCA 22,250 36,000,000 36,022,250 17,250 28,800,000 28,817,250 Mr. Aameir Alihussain 22,250 28,500,000 28,522,250 23,000 22,800,000 22,823,000 Mr. Zohair Taherali 22,250 16,500,000 16,522,250 28,750 13,200,000 13,228,750 Mrs. Sabeen Aameir 22,250 7,500,000 7,522,250 17,250 6,000,000 6,017,250 Mr. Mono Ranjan Dey FCA 178,000 - 178,000 276,000 - 276,000
Total 267,000 88,500,000 88,767,000 362,250 70,800,000 71,162,250
Key Operating and Financial Data of Preceding 6 Years ANNEXURE-4
Particulars Unit 2019-20 2018-19 2017-18 2016-17 2016 2015 2014 Jan-Jun
Production (Qty) MT 681,038 686,769 562,903 442,511 241,359 45,689 42,116
082 % of Production Growth % (0.83%) 22.00% 27.21% 83.34% - 8.48% (60.57%)
Sales (Qty) MT 742,621 668.189 549,977 503,705 192,631 54,433 76,818
% of Sales Growth (Qty) % 11.14% 21.49% 9.19% 161.49% - (29.14%) (39.38%)
Turnover MLN Tk 45,722.36 44,408.88 33,238.37 23,648.93 9,713.86 7,801.98 8,049.89
Gross Profit MLN Tk 3,674.29 4,992.24 4,828.32 3,236.93 1,362.03 458.01 188.25
Gross Profit % % 8.04% 11.24% 14.53% 13.69% 14.02% 5.87% 2.34%
Earnings before Non MLN Tk 2059.03 3,637.90 3,864.96 2,571.90 1,057.78 207.15 (66.17) Operating Income, interest, WPP&WF and Tax % 4.50% 8.19% 11.63% 10.88% 10.89% 2.66% (0.82%)
Non-Operating Income MLN Tk 16.11 41.30 123.21 113.90 359.36 1,357.07 567.28
MLN Tk 921.84 1,860.63 2,778.78 756.52 588.65 827.67 109.09 Net Profit after tax % 2.02% 4.19% 8.36% 3.20% 6.06% 10.61% 1.36%
Earnings Per Share (EPS) TK 3.90 7.88 11.77 3.53 3.02 4.78 0.70
Current Ratio (Times ) 0.97 1.04 1.04 0.75 0.78 0.73 1.09
Net Asset Value MLN Tk 23,581.64 23,007.37 13,671.41 10,876.80 10,309.79 9,803.67 8,431.80
Net Asset Value Per Share Tk 99.89 97.46 63.70 55.75 52.84 55.28 54.10
Net operating Cash Flow Per Share Tk 40.47 2.81 (8.78) (11.38) (3.53) (10.16) (5.43) DIRECTORS’ REPORT Paid -up Capital Crore Tk 236.06 236.06 214.60 195.09 195.09 177.36 155.851 ANNEXURE-5
The Pattern of Shareholdings a) Parent/Subsidiary/Associated companies and other related parties
No of Shares Held Name As on 30th June 2020 As on 30th June 2019
H. Akberali & Co. Limited 31,786,839 31,786,839
Karnafully Engineering Works Limited 5,325,130 5,325,130
Total 37,111,969 37,111,969 b) Directors /CEO/CS/CFO/Head of Internal Audit and their spouses and minor children.
No of Shares Held Name Relation As on 30th June 2020 As on 30th June 2019
Mr. Alihussain Akberali FCA Chairman 29,238,249 29,238,249
Mr. Aameir Alihussain Managing Director 22,720,109 22,720,109
Mr. Zohair Taherali Director 31,786,839 31,786,839 (Nominated Director of H.Akberali & Co. Ltd)
Mrs. Sabeen Aameir Director 5,330,122 5,330,122
Mrs. Tehseen Zohair Taherali Wife of Mr. Zohair Taherali 8,182,750 8,182,750
Mrs. Bilkis Alihussain Wife of Mr. Alihussain Akberali FCA 21,870,449 21,493,760
Mr. Abdul Qadir Zohair Son of Mr. Zohair Taherali 6,122 6,122
Mr. Shekhar Ranjan Kar FCA Group CFO & CS 23,310 23.310 083 Mr. Mohammed Reazul Kabir FCA CFO & Head of A&F 2,442 2,442 c) Shareholding status of top 5 salaried employees other than CEO, CS, CFO& HIAC
No of Shares Held Name Relation As on 30th June 2020 As on 30th June 2019
Mr. Tapan Sengupta Deputy Managing Director 43,610 24,610
Mr. Mohindar Singh Hanspal General Manager-Rolling Nil Nil
Assistant General Manager Mr. Jayant M. Lakra Nil Nil Plant Operation-Rolling
Mr. Kazi Anwar Ahmed General Manager-Corporate Affairs 4,640 13,310 & Dhaka Corporate Office Deputy General Manager Mr. Mohammad Imtiaz Uddin Chowdhury Sales & Marketing Nil Nil d) Shareholders holding 10% or more voting interest in the company
No of Shares Held Name Relation As on 30th June 2020 As on 30th June 2019
Mr. Alihussain Akberali FCA Chairman 29,238,249 29,238,249 DIRECTORS’ REPORT H. Akberali & Co. Limited Affiliated Company 31,786,839 31,786,839